Transcript Debt Or Delusion Soft Currency Economics

Debt Or Delusion
Soft Currency Economics
The UK Government is in major debt
But who do they owe?
How will we pay for all this?
Where Does Money Come From
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What is money
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unit of account, means of exchange, store of value
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a ‘neutral veil’ lying over the ‘real’ economy
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Is this correct?
Money as Social Relationship
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Money as social relation (credit and debit)
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Abstract money of account
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State money for over 4000 years(Keynes 1931)
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Control of money is a social and political issue
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Taxes drive money lets play a card game.
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Example of government spending requires deficit to save.
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Positive Money example in WDMCF.
What do banks do
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Look after our gold?
Lend out our savings to business and fellow
citizens?
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Borrow from china?
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Other?
Banks Create New Money
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Primary function of banks is money creation
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Banks create new money
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Bank 'loans' don't exist
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Bank credit creation
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Balance sheet example
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Lets play banker!
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“It proved extraordinarily difficult for economists to recognize that bank
loans and bank investments do create deposits.”
Schumpeter, J. A. (1954)
Bank Balance Sheet
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Asset
Liability
loan contract
Deposit
10,000+interest
10,000
Net = 0
Where did the money come from?
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Where did the bank get the matching liability
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They wrote the number
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Banks are allowed to create money
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Loans create deposits and reserves too
When loans are repaid the money is removed
from the system
Private Pain
The private sector can only spend what it
Earns or borrows.
Levels are currently at all time highs
90% GDP
Credit only lasts for so long
This House is different
Government can always pay
Creating new “money” is data entry
Inflation could happen if excess
UK can never “run out of money”
Floating exchange / Fixed Exchange
Positive money idea of consul bonds
QE for the people
Citizen dividend
Bond/Gilt holders
25.70%
BOE
9.30%
Banks/Building
23.10%
Insurance/pension
30.70%
Overseas
BOE holds about 30% of public debt
The government owes that to itself!
Including interest. We could cancel that
No one would lose out.
Key Points
Banks create “money”
Private sector must earn or borrow
UK Government cannot become insolvent
Gov Deficit = Non Gov savings to the penny
(net financial assets)
China not your banker
Questions